• Q4 is typically the strongest quarter of the year for occupier demand, and 2024 was no exception. Net absorption q-o-q reached 4.5 million sqm, higher than 3.2 million sqm average for the first three quarters of 2024. Nonetheless, 2024 annual net absorption came in much lower than 2023 (14.2 million vs 16.3 million sqm).

• Vacancy fell to 14.8% in Q4 2024, down 0.9 percentage points from the previous quarter. 

• Asia Pacific transaction volumes improved in 2024 compared to 2023, but investors are still cautious amid now higher interest rate expectations.

2024 marked a slowdown in occupier demand, despite the strong year-end reading. The more subdued market conditions in 2024 are a reflection of more cautiousness amongst occupiers amidst heightened macroeconomic uncertainty. A number of geopolitical flashpoints restrained economic growth, higher interest rate expectations, as well as potential new tariffs have dampened occupier activity.

Slowing demand accompanied a pullback in supply. Just 4.0 million sqm completed in Q4 2024, the lowest quarterly reading since Q1 2022 (3.0 million sqm. Around 21.2 million sqm completed in 2024, down from the 25.9 million sqm in 2023.

Rents trended lower again. Overall Asia Pacific rents are being dragged down falling rental levels across Greater China. While vacancy trended down, the amount of vacant space remains elevated.  Many landlords are still competing for tenants, offering higher incentives.

In terms of capital markets, APAC logistics and industrial volumes reached USD 33.4bn FY (Q4: USD 8.5bn), rising 26% y-o-y (Q4: +31%). Cross-border purchasers accounted for about a third of the transaction volumes in Q4 2024. Investors are still cautious given now higher interest rate expectations, but there is more optimism compared with the same time previous year.

Outlook
Occupier demand is expected to remain steady going into 2025,  although  net absorption may come in at slightly lower levels than in 2024. Supply chain uncertainty given new potential US tariffs may put a pause on activity in H1 2025 as occupiers survey the changing landscape.  Supply is forecast to moderate further (although still high from a historical perspective). Vacancy and still relatively elevated development costs is slowing down construction appetite in some markets. Investment activity may continue to gain momentum, while yields are expected to stabilize after an aggressive decompression cycle in some markets.